REGIME CHANGE: Myanmar learns the lesson of Libya

Strike Myanmar from the regime change list. Only two years ago, the resource-rich country located between India and China was practicing the kind of economic nationalism that got Libyan leader Muammar Gadhafi deep into trouble with the US State Department and oil company giants. Now, Washington has suspended its sanctions on Myanmar and nominated its first ambassador to the country in 22 years.

Why?

The Obama administration says it’s because of the profound political changes Myanmar has brought about over the last year, including the release from house arrest of Aung San Suu Kyi, who now sits in Myanmar’s parliament. But the real reason has more to do with the country’s military rulers turning away from economic nationalism and throwing their economy’s doors open wide to ownership by outsiders.

Announcing the easing of US sanctions, US secretary of state Hilary Clinton went directly to the heart of the matter, after making obligatory remarks about Myanmar travelling the road to democracy. “Today we say to Americans business: Invest in Burma (Myanmar)!” [1]

When Myanmar’s military took power in a 1962 coup, it nationalized most industries and brought the bulk of the economy under government control, which is the way it stayed until two years ago.

Major utilities were state-owned and health-care and education were publically provided. Private hospitals and private schools were unheard of.

Ownership of land and local companies was limited to the country’s citizens. Companies were required to hire Myanmar workers. And the central bank was answerable to the government. [2]

But in the last year, Myanmar’s government began to sell off government buildings, its port facilities, its national airline, mines, farmland, the country’s fuel distribution network, and soft drink, cigarette and bicycle factories.

The doors to the country’s publically-owned health care and education systems were thrown open, and private investors were invited in.

A new law was drawn up to give more independence to the central bank, making it answerable to its own inflation control targets, rather than directly to the government. [3]

To top it all off, a foreign-investment law was drafted to allow foreigners to control local companies and land, permit the entry of foreign telecom companies and foreign banks, allow 100 percent repatriation of profits, and exempt foreign investors from paying taxes for up to five years.

What’s more, foreign enterprises would be allowed to import skilled workers, and wouldn’t be required to hire locally. [4]

With Myanmar signaling its willingness to turn over its economy to outside investors, President Obama last December dispatched Hillary Clinton to meet with Myanmar’s leaders, the first US secretary of state to visit in more than 50 years. [5]

William Hague soon followed, the first British foreign minister to visit since 1955. [6]

Other foreign ministers beat their own paths to the door of the country’s military junta, seeking to establish ties with the now foreign investment-friendly government on behalf of their own corporations, investors, and banks.

And business organizations sent their own delegations, including four major Japanese business organizations, all looking to cash in on Myanmar’s new opening. [7]

A new frontier

The Wall Street Journal calls Myanmar “the last, large frontier market in Asia” and describes its “potential” as “too great for …investors to ignore.” [8] The country is gas- and oil-rich, and teems with timber and gems. It could become a major exporter of rice and seafood, though with the country’s new foreign investment law, it will be the superrich of New York, London, and Tokyo who reap the lion’s share of benefits, not Myanmar’s citizens.

A country of poor people, Myanmar offers the attraction to overseas investors of low manufacturing wages. And it’s situated between India and China, giving manufacturers easy access to two emerging growth markets.

Their enthusiasm is no less than that expressed by US ambassador to Libya Gene A. Cretz in connection with that country. Cretz said the Libyans “were starting from A to Z in terms of building infrastructure and other things. If we can get American companies here on a fairly big scale, which we will try to do everything we can to do that, then this will redound to improve the situation in the United States with respect to our own jobs” [11] to say nothing of redounding to Wall Street with respect to its enrichment.

Two countries teeming with investment opportunities. The only difference is that Libya had to be bombed in hopes that Gadhafi’s successors would lay out the welcome mat for foreign investors and US and western European corporations with greater alacrity than the resource nationalism-practicing Gadhafi did.

Myanmar’s generals got the message, and laid out the welcome mat themselves, before they too faced Gadhafi’s fate.

Notes

1. Steve Myers, “As relations warm with Myanmar, U.S. will ease trade limits”, The New York Times, May 17, 2012.

2. “Myanmar’s ruling junta is selling state’s assets,” The New York Times, March 7, 2010; “Change comes to Myanmar, but only on the Junta’s terms,” The New York Times, March 17, 2010.

3. “Myanmar’s ruling junta is selling state’s assets,” The New York Times, March 7, 2010.

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